Salary Range: What Is It And How Does It Work?

By Chris Kolmar - Nov. 4, 2020

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Determining compensation is of equal importance to the employee and employer.

For job candidates, salary range expresses their earning potential for a specific position and allows them to make an educated decision about accepting.

Employers must carefully consider the salary range in order to budget accordingly and accommodate their current staff.

When you’re in the process of applying for a job, at some point the hiring manager will notify you of the position’s salary range.

What Is a Salary Range?

A salary range is a band of pay that either an employer, or potential employee, expects to be pay, or be paid. The goal of this payment range is to give you a good idea of where your pay will be starting from, and the potential for growth in the position.

A salary range will include three tiers of compensation.

These include:

  • The lowest payment point

  • The median

  • The maximum payment point

For example, the salary range will be shown as “$50,000-$60,000”.

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For the job applicant, these numbers are important because it clearly displays what they can expect in terms of worker compensation and the growth potential. For the employer, the salary range sets guidelines for how much a particular position will make now and in the future.

What is Looked at to Determine Salaries?

There are a few factors that have an impact on a job’s salary range. Many companies participate in market research to compare salaries for specific roles to their competitors. This can be useful for employers to consider what the market average is for this type of position, and where they’d like to land in it.

Each business has a unique perspective on salary and what qualifications warrant more money.

Details that contribute to salary range include:

  • Position level within the company (entry-level vs management)

  • Complexity of responsibilities

  • Applicant experience and education

  • Applicant’s length of time in the field

  • Job market availability of applicants with required skills

  • Budget constraints

  • Cost of living in your company’s city

  • Organization reputation

  • Plans for company growth

Tips for Offering a Salary that Motivates Employees

When you find an applicant who is going to fit perfectly on your team, the last thing you want is them starting off disappointed with their salary.

Thanks to the internet, there’s a lot of information about the average salary ranges for particular jobs. This is helpful because it provides insight for both employers and employees about what they deserve to be paid.

A huge piece of employee productivity is retaining a salary that motivates them to put forth their best work. The following advice may assist in considering and presenting salary range in a way that motivates employees.

  1. Determine Company Salary Philosophy

    Before putting forth a salary offer, consider the structure of payment that best fits your organization. This can be either variable or fixed pay. Variable pay is flexible depending on company sales and an employee’s contribution. A flexible payment structure gives employees incentives to meet goals through bonuses and commission. On the other hand, offering base pay means that compensation stays the same whether an employee has reached their objectives or not.

    A start-up sales company with large growth potential might benefit from a variable pay philosophy. Whereas, a long-standing restaurant with 15 years of stable business would probably be best structured with fixed payments for their employees.

    Determining salary philosophy is crucial for creating a mutual understanding of payment details. Think carefully about which employee compensation structure makes the most sense for your business.

  2. Finding Comparison for Salary

    Potential job applicants are doing just as much research as employers.
    That means they’ll probably be doing their own detailed investigation into the competitor’s salary range for the same responsibilities and experience. Keep yourself up to date on this information, and where your salary offer lands in these barometers.

  3. Considering What Goals a Salary Must Help Achieve

    Paying your employees a salary is more than just a business expense. You’re compensating your team for working toward the company’s success and without them, advancement wouldn’t be possible. Take this into consideration when establishing a salary range for different positions within your organization.

    Considering what goals you’re hoping to achieve with a salary is key in hiring new team members. You should set a salary range with these goals in mind. For example, if you’re looking to hire one expert to fulfill a programming role on your team, you should evaluate the local competition’s average starting salary and offer a higher salary to attract more talented applicants.

    Always try to foster a team environment with your payment system by compensating according to employee contribution.

  4. Assess the Competition and Labor Markets

    The job market is constantly fluctuating and it’s driving force is changeable. Entering the labor market as an employer requires an assessment of the hiring environment. Let’s examine the current hiring competition and labor market situation for reference.

    We are in the midst of dealing with a pandemic, which cost millions of people their jobs. An absolute global tragedy. Few were spared from sweeping layoffs, and this has ripple effects on the labor market and hiring conditions. It means that the applicant pool is saturated with overloads of highly experienced and talented candidates, making it possible that you’ll have many more hiring options than you may have before 2020.

    This type of labor market may lead many employers to take advantage of employment desperation and offer lower salaries in response to the overflow of possible hires. It’s recommended to avoid overpaying or underpaying employees despite these market fluctuations. Overpayment can lead to draining resources unnecessarily and creating an unrealistic team salary expectation. Underpaying can have devastating implications on productivity and employee satisfaction. Your team must know you value them, and one of the biggest ways of doing this is properly paying them for their hard work and time.

  5. Flaunt Your Benefits Package

    Another great way to improve employee motivation on your team is by supplying an exceptional benefits package. Offering a comprehensive benefits plan can be even more enticing than a higher base-salary for some candidates. Communicate the details of this package extensively and make sure your employees are clear on the inclusiveness of their benefits.

    Benefits Packages Could Include:

    • Extra vacation days

    • Paid time off

    • Holidays off

    • Personal days

    • Gas reimbursement

    • Pension

    • Stock options

    • Discounts on company products

    • Health Insurance

    • Dental Insurance

    • Life Insurance

    • Tuition assistance

  6. Determine Bonus Philosophy and Potential

    Similarly to benefits packages, your company must consider what their philosophy on bonuses will be. The way organizations handle bonuses varies greatly. Some organizations apply a quarterly or yearly lump sum bonus to all their employees. Others prefer to give out flexible bonuses to individuals based on their accomplishments. Companies with an emphasis on sales will often supply profit-based bonuses to employees who directly aided in successful projects.

    Each system of managing bonuses has it’s benefits and consequences. For example, employers who award bonuses on an individual basis could stir up healthy team competition, but also create workplace tension and jealousy between employees. Consider the field you work in, and which system of bonuses would most effectively motivate your team.

  7. Communicate your Salary Philosophy

    When it comes to pay and rank within a company, it’s best to be straightforward with potential employees. Let them know where you’re coming from and why the salary is what it is.

    If you’re offering them a higher salary range then market median because you expect expertise and top-notch quality, explain that.

    If your business is a start-up that’s looking to have their new employees grow with them, and that’s why the starting pay is a little less than average then you should make that clear.

    When hiring new members, or clarifying with current staff, share your company’s story and goals in an honest, detailed way. You want your employees to fully understand their position, the company salary approach, and where there is room to grow in the future.

  8. Recognize that Salary Ranges are Less Used

    It’s important to understand that while establishing a salary range can be beneficial to your business and employee motivation, it is becoming less frequently used in the modern job market. Flexible pay and less structured salaries are moving in as the norm. Providing a salary range may not be necessary for every position, however, implementing it can help keep everyone on the same page and promote organized payment structure.

Evaluating Salary Range as A Job Applicant

Being offered a job, and a salary at all is very exciting. Before you jump for joy in celebration, though, take the time to assess the salary range you’ve been offered and if it’s up to your standard. Think about what your personal salary range goal is before receiving an offer. In other words, what’s the range you’re expecting or need to receive for the job to be worth your time and effort.

The internet is an expansive resource, and you should use that to your benefit during a job search. Do some research into what an employee in your profession would typically make, and make adjustments for your level of experience.

For example, the average salary range of a registered nurse in New York is between $57,000 to $98,000. An applicant who has just graduated from nursing school and has no experience should expect their salary range median to lean closer to $57,000 per year.
On the other hand, an experienced nurse who just moved to New York, but has 10+ years of professional experience should plot their ideal salary range closer to $98,000.

When you’re evaluating a salary offer, be both realistic and confident in your abilities. Don’t be devalued if you’re worth more, and avoid asking for too much without the expertise to back it up.

Things to Consider when Evaluating your Accepted Salary Range Include:

  • Your professional experience

  • Educational qualifications

  • Average market salary for your position

  • The current trends in the job market

  • The strength of your references

  • Awards or promotions you’ve achieved in the past

How to Answer “What Are Your Salary Requirements?”

Being asked about your salary requirements in an interview can feel a little bit like a trick question. Giving a salary requirement that’s too low can mean that a company will offer less than you deserve. Answer with a salary that’s too high, and it could result in being passed over for another candidate. You want your answer to reflect accurately on your experience and the unique skills you will bring to their team.

The best way to combat the over/under debate is to provide the hiring manager with an appropriate salary range. Contemplate what the average salary of the position you’re applying for is, and tailor your requirements to reflect your experience. Make sure that the low-end of your salary requirements are at least a livable wage, and that the high-end isn’t too unfeasible for market salary averages.

How to Negotiate a Salary Offer

Whether you’ve been offered a starting salary that’s not quite up to par, or you’re hoping to get a raise in a current position, negotiation skills are crucial in getting what you’re worth. Salary negotiations are a common workplace interaction between employee and supervisor, involving value, qualifications, and compensation.

While it can be a little nerve-wracking to ask for more money, look at salary negotiation as a discussion rather than a demand. The goal of negotiating your salary is to be paid appropriately, not excessively. Keep that in mind throughout the discussion.

The most effective way to secure a better salary offer is to provide the reasons why you’re worth the expenditure. This doesn’t mean to shove all the reasons why you’re so great down a supervisor or hiring manager’s throat, but instead, marketing yourself respectfully. Showcase your experience and skills in a way that makes an employee sit back and think, ‘this person is a valuable asset to this company’.

For example, if you’ve just been offered a position as an office manager at a low starting salary for your years of experience, you could say:

“I am thrilled to be offered the position of office manager. While I appreciate your salary offer of $35,000 per year, I would like to discuss a starting salary of $45,000. I have 7 years of experience in leadership and office management. I believe that my skills and experience will make me a valuable member of your team”.

If an employer is not open to considering a higher starting salary, ask about what benefits their organization offers for employees. Sometimes, a company’s benefit’s can be more precious than the extra money.

Remember, you always have the option to say no if you’re not being paid what you deserve. Be firm with what you believe you’re worth, and willing to continue searching if a company can’t meet this standard. There are more jobs out there who are ready to provide a suitable wage.

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Chris Kolmar

Author

Chris Kolmar

Chris Kolmar is a co-founder of Zippia and the editor-in-chief of the Zippia career advice blog. He has hired over 50 people in his career, been hired five times, and wants to help you land your next job. His research has been featured on the New York Times, Thrillist, VOX, The Atlantic, and a host of local news. More recently, he's been quoted on USA Today, BusinessInsider, and CNBC.

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